Turmoil Week: Portsmouth

This week, we shall be running a series of five posts examining the fortunes of 5 clubs that have experienced significant financial and/or organisational turmoil in recent times. Unfortunately, this cross section is but the very precarious tip of a very grubby iceberg indeed – and if you think the problems we shall detail are unique to this quintet alone or indeed the 72 clubs in the Football League, then think again.

First up are Portsmouth and we are extra pleased to welcome SJ Maskell, the contributor to a string of tough minded articles covering the south coast outfit in the pages of pioneering blog Two Hundred Percent down the months. Indeed, SJ wrote just yesterday of the latest unhappy episodes in the whole saga and this piece can perhaps be viewed as a companion perspective, synthesizing as it does the great many lows suffered by Portsmouth Football Club over the past decade. Copyright lies with SJ Maskell.

Pompey has been a ‘Basket Case’ of a club more or less since the inception of the Premier League. Mention that you’re a fan of the club in any encounter with someone who works for the football authorities and, as long as it’s not a public forum, you’ll get a roll of the eyes and an expulsion of breath that tells you everything you need to know.

If evidence was ever wanted that football is, ‘The worst governed sport in the country,’ then Pompey is the place to find it. Anyone truly interested in the financial stability of the game would find a proper forensic investigation of the club’s affairs, probably from the date of their promotion to the Premier League in 2003.

It began here (more or less) …

Milan Mandarić, Peter Storrie and Harry Redknapp kept the club in the Premier League long enough for Milan to be able to sell it on as going concern to the young Sacha Gaydamak in 2006. Milan walked away with a reputed £10m profit and Harry and Peter got access to what they seemed to believe were the unlimited funds of an Abramovich-style sugar-daddy owner. A happy spending spree on players way beyond the club’s means followed and Pompey ran out as FA Cup winners in 2008.

It now seems incredible that anyone thought an owner with no visible income except access to his father’s billions gained largely from dealing in arms and blood diamonds would sustain a club living so far beyond its means indefinitely. Some people still think it was the credit crunch that hit the Gaydamak funding. However, the strange coincidence of Pompey’s troubles arising at the same time that Sacha’s father, Arcady, was avoiding an international arrest warrant, having his assets frozen and fleeing from Israel to Russia leaves little to the imagination as to where the money was coming from. Redknapp decamping in the middle of the 2008 UEFA Cup campaign made it clear that trouble was brewing.

The intimation that this was down to Arcady’s problems was further evidenced by what happened when Sacha finally sold the club in August 2009. After a protracted period of due diligence during the close season Sacha sold the club to the world’s seemingly only skint Arab, Sulaiman Al Fahim. During this time a mystery consortium materialised, one which Peter Storrie said would take the club to ‘a level you would not quite believe.’ Throughout Al Fahim’s short tenure, during which there was a threat of a winding up order from HMRC, this consortium hovered in the background. When funds to maintain the players Storrie had brought in failed to materialise the Ali Al Faraj consortium was able to step in. Using a loan from Hong Kong businessman Balram Chainrai and Israeli partner Levi Kushnir, they were able to pay the wage bill in October 09. From then there came a steady decline into administration.

The thickening of the plot

It soon became apparent that the backers of the never-to-be-seen Al Faraj were a group of businessmen coincidentally having trouble getting money from Arcady Gaydamak in the Israeli courts, operating as Falcondrone. (This is covered in more detail here and here.) Fans’ suspicions were aroused within ten days of the takeover by the fact that the Al Faraj consortium had not got control of the land around the football club that was essential to the development of the dilapidated stadium. This land remained in the control of Sacha Gaydamak, as it does to this day, and effectively told fans that there would be no immediate attempt to improve the club.

By the end of October 2009 it was apparent that the consortium had some idea that a quick refunding and sale of the club was the thing to do. Strangely they thought this was possible by sending in a known fraudster, Daniel Azougy, to manage the finances. The refunding never materialised except in the form of the reported £17 million loan from Chainrai and Kushnir’s company Portpin. Bills went unpaid and the club repeatedly struggled to cover the wage bill month after month. The taxman finally lost patience and issued a second winding up order on the club in December 2009.

Chainrai takes control

In January 2010, against a background of escalating fan protest, players were sold to cover the wage bill, so it was said. Falcondrone defaulted on the first repayment of their loan from Chainrai and Kushnir, having already defaulted on payments due to Sacha Gaydamak for the purchase of the club – debts taken on when they bought the club from Al Fahim. Chainrai had taken the precaution of securing his loan against the club’s assets and thus was able to seize ownership of the club from Falcondrone on 5 February 2010, just before the winding up order was due to be heard. A stay of execution was achieved as the club was up for sale. However, due diligence would have told any serious buyer that the club was in hock way beyond its worth. Administration was inevitable and occurred on 26 February 2010.

The team showed considerable spirit throughout, probably spurred by the adversity, and took the fans all the way to Wembley again. This somewhat ironic run of fortune was, to many, more thrilling than in 2008. Particularly satisfying was the 2-1 defeat of Harry Redknapp’s Tottenham at Wembley in the semi-final, a match that is way up in the top three of fans’ favourite games ever. A team of loanees, youngsters and players who could not be shifted in numerous fire sales gave us a great day out. This came the day after we were officially relegated, sunk by the nine point deduction for going into administration. Unfortunately Chelsea did for us in the final.

Close season 2010 was a more anxious time than the previous year as the club’s CVA route out of administration was challenged by HMRC. Administrator Andronikou rode out the challenge however, although some serious questions were raised in court about the management of the club in the period October 2009 – January 2010, including a clear breach of the insolvency laws. Events of this period are now subject to a forensic investigation consequent on the liquidation of the club’s parent company Portsmouth City Football Club Ltd.

Coming out of administration was not straightforward however. Messrs Chainrai and Kushnir, as secured creditors, rose above a variety of tyre-kickers and wannabes to be the only viable new owner in the eyes of the administrator. From defeating HMRC in May it took six months for them to regain control of the club. Much negotiation between the administrator, Chainrai, the Football League and Sacha Gaydamak as the only other secured creditor resulted in a dramatic climax to matters on the 22 October 2010 with declarations in the press that if Sacha did not play ball the club would be liquidated within days. Fans set off to the away game at Hull in the fear that this would be the last game they would ever see. What gave these hysterical statements their credence were that they were endorsed by the club’s new CEO, David Lampitt, fresh from employment as head of integrity at the FA. Sacha did sign off the deal as he claimed he had always intended and Chainrai and Kushnir emerged as the owners of the club.

The Leagues’ responsibility?

The Football League, we were assured, would bring careful scrutiny to bear on all the club’s financial dealings whilst the CVA was in force – the next five years. It was understood that Chainrai and Kushnir had underwritten the CVA, that parachute payments would pay the football creditors and that the owners would be unable to take any money from the club until the CVA was paid up. However, Chainrai and Kushnir took care to re-secure their money by taking out a fresh charge on Fratton Park.

It is known that the football authorities were well abreast of affairs from 2008 on. This became clear when a group of Pompey fans, SOS Pompey, met with the Premier League in February 2010 at the time Chainrai seized ownership. Producing a carefully researched matrix of the links between our various owners over the two years, the fans were told that the PL had a similar matrix – only with far more detail. They must have been very relieved to hand the problem over to the Football League.

Post-Administration

Despite having a somewhat small, if expensive, squad, manager Steve Cotterill kept the club in the Championship in May 2011. This was whilst the club was running under a highly restricted budget. It emerged in January 2011 that Mr Chainrai had no intention of putting any more of his money in the club. Despite occasionally claiming he had ‘caught the Pompey bug’ he described himself as a reluctant owner who was looking for a buyer who could take the club forward – and off his hands.

The problem with this was, even with the CVA in place, the price wanted for the club was greater than the club was really worth. Chainrai and Gaydamak still have secured debts and the dilapidated ground and lack of development space, due to Sacha still holding the extra land, meant that the club would struggle to be self-sustaining. Legacy issues reared their heads in the shape of unchangeable player contracts negotiated by Peter Storrie coming back to bite. Some players, such as Tal Ben Haim, still drew down Premier League money, and extension clauses in the contracts of Michael Brown and Richard Hughes meant they could not be played in the second half of the season, for fear of triggering more years for them on Premier League money. It seems a club in trouble still has to honour football contracts it can no longer afford whilst local businesses and charities get a fraction of what they are owed.

Fresh Start?

Another tense close season followed in 2011. From about March rumours started circulating of interested Russian buyers. Throughout the usual (for Pompey fans) media dance negotiations with Convers Sports Initiatives became more and more public.

CSI were a UK based firm owned by Vladimir Antonov, a Russian banker, Hungarian Roman Dubov and Chris Akers of Leeds United fame. They owned a number of sporting franchises, in F1 and Powerplay Golf in particular, and were looking for a football club. They had flirted with Rangers and Bournemouth and then alighted on Pompey. During their negotiating period it became clear that there were many doubts over the legitimacy of Mr Antonov’s business past, which included Russian banking, Spyker cars and an interest in SAAB motors. However, the Football League felt that such doubts were unfounded and passed them as Fit and Proper. CSI took over the club on the 1st June with Antonov, holding 75% of the shares, becoming chairman. It seemed that they felt there was profit in Pompey – despite doubts among many fans. Doubts that were not helped by the fact that Sacha Gaydamak had not been approached about the land he held. Development of the club’s infrastructure yet again did not seem to be on the agenda.

The club did not start the 2011-12 season well and fans’ displeasure at high prices and poor performance on the pitch built pressure on the manager and the CEO. CSI though would not be hurried and made little in the way of contact with fans except through their professional social media sites. We know now that Mr Antonov made a loan to the club from CSI of £10.8 million to cover player purchases and day-to-day running costs – the club still running a wage bill above a sustainable level given the 20,000 capacity of the ground which is seldom filled.

However, visible progress was hard to detect and there were rumblings amongst fans in regard to Antonov’s complex past, including some concerns about the source of his fortune. However, cognisant as we have become of international economics at Pompey in recent years, we soothed ourselves with the caveat that very few rich Russians had spotless histories – citing Abramovich himself in our rationale. But it was more difficult to rationalise the fact that the FSA would not license Antonov’s Snoras Bank to operate in the UK, that the European Investment Bank would not lend to SAAB if Antonov was the owner, that General Motors would not trade with SAAB in the same circumstances and that the US were not willing to grant him a visa. Then there was his encounter with assassins from the Chechen Mafia … an interim Kroll Report found in a simple Google search outlined the whole business. Antonov claims to be the innocent party in all these encounters and that there are political moves against him that blacken his name. More detail can be found here.

But not to worry – he was clean enough for the Football League to pass him fit and proper to own our poor abused club. It seems they do not have the money to fund an investigation of every new owner. The internet obviously has not got to Preston yet. What happened next makes you wonder if the football authorities really have got it in for Pompey.

In November, despite our dismal start, Steve Cotterill was headhunted by Nottingham Forest. It took some time to find a manager who would work for the money available to pay him. Michael Appleton was the consequent choice but before his feet were properly under the table, Antonov’s past jumped up to bite the club severely on the behind. His bank guaranteeing funding of Pompey – Snoras in Lithuania – was seized and put into administration by the regulatory authorities. A European arrest warrant was issued and within two days the Latvian branch of the bank was also put into liquidation by the authorities there. These actions were triggered by ‘significant outflows’ of cash from both banks that left them unable to meet their liabilities. The arrest warrant for Antonov and his banking partner, Raimundas Baranauskas, cited charges of ‘fraudulent accounting, forgery of documents, abuse of authority, misappropriation of property, money laundering and other criminal offences committed by the bank Snoras.’

Chainrai returns

Balram Chainrai instantly put a charge on CSI that forced them into administration. CSI had not paid the first installment of the purchase price of PFC and Chainrai sought to secure his money. This opened up fears that Chainrai could seize PFC and become the reluctant owner yet again. That this hasn’t happened may be explained by the wish to avoid embroiling the club in the administration of its parent company and thus incur another points deduction, although it isn’t yet certain that this won’t happen further down the line. On the other hand, Mr Chainrai has always been reluctant to spend money on the club.

Antonov has since surrendered his passport in London and awaits extradition hearings over the next few months. He says he is in fear of his life if he is taken to Lithuania. He has resigned as PFC chairman. Guilty or not, his chequered past has had dire consequences for many, including PFC.

Fit and Proper Football League?

Pompey is now searching for its sixth owner since Gaydamak sold in 2009. Given that CSI helped fund the club there is very little chance of it surviving the season without someone being willing to underwrite the everyday running costs and the CVA. Chainrai is said to have made a £1m loan (to add to the rest he is owed) to keep the club running for January, although many are sceptical about the reports of that money and David Lampitt did not seem aware of it on ExpressFM Monday evening. The club needs to be sold to meet CSI’s debt to Chainrai and the administrator, our old friend Andronikou, has to find the best deal he can for CSI’s creditors, chief of who is Chainrai. PFC is the only asset of CSI of worth, particularly in that the ground is still attached to the club.

Front runner to purchase the club, up to the afternoon of 20 January when he withdrew his bid, was Sicilian American Joseph Cala, a man with no current business that has any turnover, limited personal wealth, who claims to be in the business of building underwater casinos but hasn’t actually built any yet and was involved with Salerno in Italy’s Serie C for three weeks before failing to pay the wages as the club went bust. His philosophy of finance seems to be that you can stack up losses to put against future profits.

That Cala was entertained at all may have more to do with an outstanding £1.6 million tax bill than his suitability as a football club owner. Mr Chainrai is in an invidious position. If no buyer is found then he will have to pay this bill or let the club go under and lose his money. We will not survive another winding up order. Being under a CVA for which no payments have yet been made and without a viable buyer, the chances are that the court will not allow us to go into administration again. As it is Cala being a preferred buyer casts all sorts of doubts on the role of both Chainrai and his chosen Administrator.

Mr Chainrai’s plight raises no sympathy in the City of Portsmouth.

If the Football League continues to pass people such as these as ‘Fit and Proper’ we seriously need to think about staging a coup. Because the regime as it stands is as rotten as hell.

Pompey Supporters Trust and Fans Conference have set up a website to gather details of all Pompey Supporters in one place to give power to our voice. Please visit: http://www.pompeys12thman.co.uk/ to sign up and support Pompey Fans who want to save our club.

1 Comment

scarf

January 24, 2012

Brilliant article – thanks. This is the first time I’ve read something about Pompey’s finances without ending up feeling confused about the different parties and how they relate to each other. Hopefully a decent buyer can be found…wouldn’t hold my breath, mind…. The bit about the FL Fit and Proper Person test is depressing, if unsurprising.